Sonic hedgehog protein signals not as a hydrolytic enzyme but as an apparent ligand for Patched

The amino-terminal signaling domain of the Sonic hedgehog secreted protein (Shh-N), which derives from the Shh precursor through an autoprocessing rea ction mediated by the carboxyl-terminal domain, executes multiple functions in embryonic tissue patterning, including induction of ventral and suppres sion of dorsal cell types in the developing neural tube. An apparent cataly tic site within Shh-N is suggested by structural homology to a bacterial ca rboxypeptidase, We demonstrate here that alteration of residues presumed to be critical for a hydrolytic activity does not cause a loss of inductive a ctivity, thus ruling out catalysis by Shh-N as a requirement for signaling. We favor the alternative, that Shh-N functions primarily as a ligand for t he putative receptor Patched (Ptc), This possibility is supported by new ev idence for direct binding of Shh-N to Ptc and by a strong correlation betwe en the affinity of Ptc-binding and the signaling potency of Shh-N protein v ariants carrying alterations of conserved residues in a particular region o f the protein surface. These results together suggest that direct Shh-N bin ding to Ptc is a critical event in transduction of the Shh-N signal.